Child plans

Will Your Investments for Your Child’s Future Meet Rising Education Costs?

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Will Your Investments for Your Child’s Future Meet Rising Education Costs?

The phone rings at your home. Your uncle is on the line and informs you that your nephew has made it to a leading medical college. After you profusely congratulate your uncle and nephew, you almost fall off your chair. This is after your uncle tells you about the fortune he will spend for your nephew’s medical education. You think about your little child and the investments you are making and wonder if they will be enough.

Spectre of rising educational costs

World over, higher education costs grow faster than general inflation. In India, things are no different. Consider this. Cost of higher studies, especially the technical education in a metro city like Delhi, has almost doubled in seven years in the period up to 2014*. If the costs go up at the same rate, in next 15 years, expect the costs to increase by four times i.e. a course costing Rs 25 lakh, will rise to Rs 1 crore.

So, how do you counter runaway rise in higher education costs? Relax, you don’t need to do silly things like buying a lottery ticket. You need to harness the power of equity investments.

Over long periods of 8-10 years or more, equities grow faster than alternative investments such as debt investments like fixed deposits (FD) and real estate.

In the last 15 years, equities as represented by BSE benchmark stock index, Sensex, grew at 16.11%** annually.

Assuming that you invest Rs 10,000 every month in equities for 15 years and the investments grow at even 8%, you still end up saving Rs 34.60 lakh. Now, you would wonder how does a person like you with little idea about equity investments get to exploit the power of equities. The good news is that you have child unit linked insurance plans (ULIPs).

Like all ULIPs, child ULIPs provide life insurance protection to the child in the event of untimely demise of the insured parent and help cover present and future needs, like higher education costs. They also help save large amounts needed for higher education thanks to investments made by expert fund managers.

Child plans ensure that you never fall off your chair thinking about the costs of your child’s higher education. In fact, they help you dream more about the good things that will happen to your child in the future.

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